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Tax invoices - a VAT update

We know that:

  • many non-profit organisations are registered for value-added tax (“VAT”); and
  •  many others are considering the benefits of voluntarily registering.

It is therefore important that we update you on some recent issues relating to the VAT registration process, to VAT registration thresholds and to “tax invoices”.

VAT registration process

A new single registration process was implemented by SARS on 12 May 2014, which is designed to ease a number of the practical difficulties experienced when applying for VAT registration. With this single registration process, it is intended that taxpayers who are already registered on e-filing for any type of tax can apply for VAT registration online and that all required documents can be submitted online. If the process functions as it should, it would then be necessary to go into a SARS branch physically only if required by SARS to do so. Early feedback suggests, however, that applicants are still needing to go to SARS; we would be interested to hear your experience if you have attempted on-line registration!

Registration thresholds for VAT purposes

  • The threshold for compulsory registration for VAT remains at the level of taxable supplies of R1 million in any 12 month period. However, from 1 April 2014, there is no longer a requirement to anticipate the point at which the organisation would reach this threshold level; instead registration is required either:
    • once taxable supplies have exceeded R1 million;
    • or when the organisation has a contractual obligation to render supplies exceeding R1 million in a period of 12 months.  
  • With regard to voluntary registration, organisations that qualify as “welfare organisations” under the VAT Act still do not require any taxable supplies in order to be able to register. However, those non-profit organisations that are not welfare organisations (described as “associations not for gain” in the VAT Act) are in the same position as any other organisation that might consider voluntary registration for VAT - for such organisations, the voluntary registration threshold remains at R50,000 for any 12 month period. However, from 1 April 2014, it is now possible to register for VAT when it is reasonably expected that taxable supplies will exceed R50,000 within 12 months from registration (subject to regulations which are still in draft form).

Tax invoices

It is important, both when issuing invoices and when accounting for invoices received from suppliers who are VAT vendors, to comply with the requirements of section 20 of the VAT Act, under which a registered VAT vendor must issue a “tax invoice” within 21 days of making a supply. If the consideration for the supply exceeds R5,000, that tax invoice must contain the following details:

·        The words “tax invoice” in a prominent place.

·        The name, physical and/or postal address and VAT number of the supplier.

·      The name, physical and/or postal address and, if the recipient is registered for VAT, the VAT   number of the recipient.

·        Full and proper description of the goods/services.

·        The quantity or volume of the goods/services.

·        The value of the supply, the VAT amount and the total consideration.

SARS provides an illustrative “tax invoice” on page 84 of its VAT 404 Guide for Vendors which you may find helpful...click here

For tax invoices for a consideration that does not exceed R5,000, a tax invoice need not show the name, address and VAT number of the recipient.

Please remember that, if you do not have a valid “tax invoice” for goods/services that you receive, the input VAT on the purchase of those goods/service cannot be claimed.

We hope that you will find these points useful and send our best wishes,